In a surprise to most China watchers and forecasters, China’s manufacturing base unexpectedly shrank in July.

"The level of economic prosperity in China has fallen, the foundation for recovery still needs consolidation," NBS senior statistician Zhao Qinghe said in a statement on the bureau website.

The surprise shrinkage is a reminder that the global economy remains very much in a stagflationary recession which is not going to improve any time soon.

Weak demand has constrained recovery, Bruce Pang, chief economist and head of research at Jones Lang Lasalle Inc, said in a research note. "Q3 growth may face greater challenges than expected, as recovery is slow and fragile."

Within China, the manufacturing decline is only going to complicate their growing mortgage, real estate, and banking crises.

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2 years ago · 4 likes · 2 comments · Peter Nayland Kust

The jaws of the middle income trap are closing.